Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57580
Authors: 
Latina, Joelle
Piermartini, Roberta
Ruta, Michele
Year of Publication: 
2011
Series/Report no.: 
WTO Staff Working Paper ERSD-2011-06
Abstract: 
When looking at the conditions of trade in natural resources the world appears upside down: tariff protection in natural resources sectors is generally lower than for overall merchandise trade, while export restrictions are twice as likely as in other sectors. On the other hand, tariff escalation is significant in natural resources sectors, where materials in their raw state face, on average, lower duties than in their processed form. In this paper, we discuss how export taxes and tariff escalation may be the result of an uncooperative trade policy. Specifically, tariff escalation and export taxes can be beggar-thy-neighbor policies because governments may be tempted to use them to alter the relative price of exports to their advantage (terms-of-trade effect) or to expand the domestic processing industry at the expenses of foreign production (production relocation effect). In equilibrium, these policies offset each other in a Prisoners' Dilemma situation, where trade is inefficiently low.
Subjects: 
Natural Resources
Export Taxes
Tariff Escalation
Prisoner's Dilemma
WTO
JEL: 
F13
F59
Q34
Document Type: 
Working Paper

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